A club where venture capitalists meet startups

LONDON (CBS.MW) -- "A bit of a meat market." That's how one entrepreneur described London's First Tuesday Club, where around 1,000 Internet and other tech start-up hopefuls mingled with venture capitalists, private investors, lawyers and other advisers.

Tuesday's turnout for the club, which got going in October 1998, was the biggest to date, helped by some publicity in local newspapers here. It also coincided with similar meetings held in Barcelona, Tel-Aviv, Moscow, Munich, Prague and Zurich. The club will add another 10 cities in November, including an event to be held in Silicon Valley.

By all accounts, interest in London's Internet scene has skyrocketed since British-based Net-service provider Freeserve
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went public July 26 on both sides of the Atlantic. Six months ago, the First Tuesday club had 50 members, but some 3,000 people attended its events across Europe in September, said Rick Morris, club member and partner with Atlas Venture.

Morris said about two-thirds of those attending the club meetings are dreamers aspiring to run their own tech startup, with the rest making up investors and advisers, and lawyers who come along peddle their services.

It's also a get-together that, for some, may prove daunting. Andy Crysell, a young newcomer, said it wasn't easy to approach the "VC's"-- identified as such by a red sticker on their name badges. He cited fierce competition and an abundance of competing entrepreneurs, the folks wearing green stickers. Everybody else wore yellow stickers.

Crysell, the founder of Listings.co.uk, hopes to launch his site in early 2000, but he hasn't given up his day job yet. Even though the investors at the meetings are looking for the next big thing, Crysell said approaching venture capitalists there was tantamount to "cold calling on the telephone."

Dylan Schlosberg, co-founder of 3-month old web mail shopping service called Y-bag.com, said plenty of investors in London are willing to look at business plans. "What is hard to do is get them to part with the money," said the entrepreneur, whose company has raised initial capital of 1.5 million pounds ($2.4 million).

Picking a winner

Morris' firm Atlas Ventures been investing in technology and life sciences for 18 years and has a $400 million fund which invests worldwide. This year, Atlas launched a new fund to help focus on e-commerce and Internet ventures. They met the founders of ClickMango.com, an alternative medicine Internet site, at a previous First Tuesday gathering.

ClickMango, which isn't due to launch until next year, has secured 3 million pounds from Atlas Venture.

Morris, whose firm gets hit with 10 requests a day to read business plans, has been researching ClickMango for some time. "We'd seen a few plans, and we liked this one a lot," he said. "They want to build a content rich site and they've signed up a lot of experts in the field."

"We like to believe there's an opportunity beyond the U.K.," he said, referring to Atlas' investment criteria. "If it's a national play, that will limit the ultimate size of the operation and valuation on operation. We like to see a clear merchandizing strategy. You can't build Web sites to drive traffic through."

Changing times

ClickMango's co-founders, Toby Rowland, 30, and Robert Norton, 27, began pitching their business plan in August. They polled their friends who had started up businesses overseas and asked for a list of a dozen venture capitalists to approach. "There are increasingly firms who one can pitch to," said Norton. "The difficulty is always in finding a lead investor."

When he and his partner quit their jobs in June and began building ClickMango, they landed in the middle of a "feeding frenzy" on Internet startups looking for capital, he said. "The joke now is that everybody is an incubator and not everyone wants to be incubated."

Mark Bernstein, founder and chief executive officer of Gameplay.com, knows all too well how the scene has changed in London. When his firm was getting started 18 months ago, interest in Internet companies was so low that "we didn't even try get funding," he said.

At Gameplay.com's Aug. 2 launch on London's Alternative Investment Market, the company raised 31 million pounds, above the initial offering price of 21 million pounds. But Bernstein said up to 200 million pounds could have been made available.

His firm is now looking to expand through acquisitions in European mail order, content e-mailing and technology. And the business plans keep pouring in, he said. "I see three to four ideas a week, and go for one every three months."

Incubator trend

The London entrepreneurial scene recently attracted the attention of four of Silicon Valley's biggest guns: Cisco Systems
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Exodus Communications
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Oracle
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and Sun Microsystems
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These companies have set up a technology incubator, to offer Britain's tech hopefuls a ready-built Web laboratory in which they can test and develop their business before getting it off the ground. Entitled Business-incubator.com, the group hopes to bring "much needed direction" to Britain's online economy. See full story

But, the big four aren't without competition. Rohit Talwer, co-founder of www.fastfuture.com, who was wearing the hats of entrepreneur and venture capitalist, said his firm also plans to help drive business forward in Britain. "We don't just want to give money away," he said

Fastfuture.com offers an incubation-type service to help Internet hopefuls that it believes has promise get to market. The company takes a stake in the prospective business through such as avenues as venture capital or a percentage of equity.

He too said there's a lot of money out there for Internet hopefuls, but he was seeing repetitive Web site ideas, such as "at least four different web auctions."

Traders turned turtles

With all that competition, some hopefuls were going to great lengths to ensure potential investors didn't forget them.

Former Deutsche Bank traders, Robert Jenkin and Eddie Yongo, brought along glossy business plans for Yellowturtle.com. The site will offer novice investors a chance to play the stock market, with either a fantasy trading button, or live trading, when they feel confident enough. They'll be offering a cash reward for the best fantasy traders at the end of a four month period.

"We're sort of an investor community MotleyFool with market data," he said, referrring to the educational finance site.

Other Internet hopefuls appeared to be moving fast and saying little, on the fear that sharing could lead to an idea being snatched and also ahead of a potential launch. Commodity broker Vincent Coyle wouldn't let onto what his plan was, and was accompanied by his lawyer, who was keeping him from saying too much.

Scanning the packed hall, he promised his soon-to-be launched idea would be big and would "eclipse the entire room."

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